Mon. Mar 8th, 2021



High hopes for jobs and TV's ‘Made in the USA’

4 min read
On a single production line, about 45 workers are assembling the first televisions made in the US by an American company in decades.

By Hal Weitzman in Chicago Financial Times
Much of Element Electronics’ factory in Canton, a suburb west of Detroit, is empty. But on a single production line, about 45 workers are assembling the first televisions made in the US by an American company in decades.
So far, it is a small operation, but Element’s attempt to bring TV manufacturing back from Asia to the heart of America’s rust belt is a powerful example of reshoring, the trend of jobs once outsourced to low-cost emerging economies being brought back to the US.

Reshoring is causing great excitement in the US. Companies such as General Electric and Caterpillar have been touted as high-profile examples of the trend. Since 2009 GE has announced plans to create 11,000 manufacturing jobs.
In an election year, reshoring has also become a potent political symbol, a counterweight to those who say the US is in decline or that current economic policies are not working.

One of President Barack Obama campaign advertisements accuses Mitt Romney, the presumptive Republican presidential nominee, of “shipping American jobs” to Mexico, China and India, both as a businessman and as Massachusetts governor.
Visiting a Wisconsin locksmith in February that brought back 100 jobs from China, Mr Obama touted pro-reshoring policies, such as tax breaks for US manufacturing and research, as examples of how his administration is creating jobs.
“Ask yourself what you can do to bring jobs back to your country, and your country will do everything we can to help you succeed,” he said, standing in front of a pile of crates stamped “Made in the USA”.
Yet it may be over-optimistic to bank on reshoring. Although the practice could create up to 3m jobs in the US by 2020, according to Boston Consulting Group, the consultancy reckons only a quarter of them will be directly in manufacturing. That compares to some 5.4m jobs the manufacturing sector has lost since the turn of the century.
Element’s experience demonstrates both the opportunities and limits of reshoring. Unusually for a reshorer, Element is a start-up in an industry that has long been in decline in the US. Consumer electronics manufacturing began to leave in the 1950s – first for Japan, then to South Korea and later to China.
While reshoring’s champions often cite rising wage costs in China, Mike O’Shaughnessy, Element’s owner, says the main costs that determined his decision to start operations in the US were high US import duties on larger and more expensive televisions, and freight costs.
“We realised seven or eight years ago that at some point in time it might make sense to bring certain elements of assembly to the US because of variable costs such as transportation, duties and currency fluctuation,” he says. “In 2008-2009, we started to look at it more seriously.”
The factory last month shipped its first batch of 46-inch-screen TVs to retailers such as TargetWalmartCostco and QVC, the home-shopping channel. They are selling for $499, a price in line with the Asian competition.
But Mr O’Shaughnessy explains that the economics only work for large television sets. “If you’re in the toaster business, where the products are small, the cost of shipping the product is relatively low, so even if your container costs double, the impact is relatively small, you’ll continue importing,” he says. “If you’re in the large-screen TV business, it makes more sense to move here.”
Indeed, Mr O’Shaughnessy – who has been importing TVs from Asia for a decade – will continue to source smaller sets from Asia.
Even on his US-assembled sets, however, Mr O’Shaughnessy is still paying vast freight costs, since he is importing nearly all the components from China, Japan, Taiwan and South Korea. That reflects a further limitation – the lack of a local supplier base for some US manufacturers.
Element is talking to suppliers in Detroit and expects to start sourcing some parts locally from next year, although it could take several years before that reduces freight costs significantly.
The company faced another barrier to reshoring: the lack of skills in the US. It came up with an ingenious solution, bringing workers from factories in China to the US for one month to train their American counterparts.
Other US manufacturers may not be able to copy that idea. The sector has 600,000 unfilled positions because of a lack of qualified skilled workers, according to a report by Deloitte, the consultants, and the National Association of Manufacturers. “There is certainly a question that the lack of skills could hamper the short-term reshoring efforts,” says Deloitte’s Craig Giffi.
Even if reshoring gains pace, it may not help much to bring down unemployment. “The jobs are not being moved back here ‘one for one’,” Mr Giffi notes. “Typically, the new facilities and operations here are substituting capital – in the form of new advanced manufacturing processes – for low-cost labour that was available there.”
Boston Consulting Group argues that by 2015, it may be more economical to manufacture many goods in the US and promises “an American manufacturing renaissance”.
Paul Ashworth, an analyst at Capital Economics in Toronto, is sceptical. “With wage costs in many developing countries still such a small fraction of US levels, and productivity in those developing countries catching up with US levels faster than labour compensation, we see no reason to believe that US manufacturing employment is about to undergo a renaissance,” he says. “It is more likely that manufacturing employment will continue to trend lower.”
Mr O’Shaughnessy, who plans to double his workforce and produce up to 250,000 TVs a year, says that while he is proud to be doing it, he recognises that reshoring may never become a big trend.
“I don’t see a major shift but I see shifts,” he says. “You have to be strategic about how you do it.”
Original Article  HERE

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